Home Retail Group Plc Reports Strong Sales Performance

Home Retail Group Plc (LON:HOME) says full year profit will be at the “top end” of expectations.

The Motley Fool Staff

Published 16 January, 2014 10:09 am GMT

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In an interim management statement for the 18 weeks to 4 January 2014 published this morning, Home Retail Group (LSE: HOME) revealed that both its Argos and Homebase operations increased their sales, although margins at the two businesses were reduced. Home Retail Group’s share price is currently up 3%.

Total sales at Argos grew to £1,808m, an increase of 3.6% (3.8% on a like-for-like basis), with a strong performance being recorded in electrical products, attributed to growth in video gaming, tablets, televisions and white goods. But the electrical product sales mix served to reduce the gross margin by 50 basis points (bps).

The company reports that online sales now account for almost half of total sales at Argos. Mobile commerce sales — eg, from smartphones — represented 20% of total sales in the period, which, the company says, strengthens its plan to transform Argos into a “digital retail leader”.

At Homebase, total sales put on 2.3% (4.7% like-for-like), rising to £464m, driven, the company says, by growth in sales of “big ticket” items. But it also reports that the sales mix in this category was responsible for the 75 bps gross margin decline.

Ten Homebase stores were closed during the 18 week period, reducing their total number to 323. The closures were continuation of the company’s plan to reduce its total physical outlets to 300, as part of a strategy to focus more on multi-channel development.

Commenting on the statement, Chief Executive Terry Duddy said:

“We are pleased that both Argos and Homebase have delivered another period of good trading performance despite a challenging consumer environment.

“As a result of the trading performance, we now expect to achieve full year Group benchmark profits towards the top end of the current range of market expectations of £90m to £109m. We remain on track to deliver the investment plans in both businesses.“

At 207.1p, Home Retail Group’s share price has barely moved over the past five years, but is up 71% on this time last year and has grown by almost 200% since its nadir of mid-2012.